XLE ETF

Understanding economic and business cycles is crucial for investing; secular trends often outweigh basic economic cycles in importance. I am downgrading XLE from 'Strong Buy' to 'Hold' due to expected declines in Brent Crude Oil prices and increased energy supply. Energy Select Sector SPDR Fund's performance has been strong, but with plateauing profits and a modest 3.28% yield, future returns may disappoint investors.

Passive investors looking to take on a more contrarian position in the new year may wish to consider some of the sectors that most investors may be ignoring as the rise of the artificial intelligence (AI) boom continues.

As A.I. stocks rally on news of the Stargate project, @Theotrade's Don Kaufman's stays bullish on Broadcom (AVGO) due to its ability to ride on co-tails of leaders like Nvidia (NVDA). He later breaks down his bullishness in Nike (NKE) and bearishness in the energy sector (XLE).

The final trades of the day with CNBC's Melissa Lee and the Fast Money traders.

The XLE ETF, dominated by Exxon and Chevron, has decoupled from WTI crude oil prices over the past 18 months, suggesting a potential profit-taking opportunity. At current oil prices, the P/E ratio may rise to over 20x over the next 12 months, which would be expensive for a sector that is barely growing. Investors are likely to be better off buying oil futures rather than the XLE, as the current ratio implies negative excess returns over the coming years.

The oil and gas sector has averaged a -1.5% return in recent rate-cutting cycles, underperforming other cyclical and defensive sectors. XLE trades above its 3-year historical average in both P/E and EV/EBITDA, implying a 17% downside to fair value. Despite potential risks, historical data and current valuation support selling XLE, with a fair value estimate of $75.

Designed to provide broad exposure to the Energy - Broad segment of the equity market, the Energy Select Sector SPDR ETF (XLE) is a passively managed exchange traded fund launched on 12/16/1998.

Jason Snipe, founder and CIO at Odyssey Capital Advisors, joins CNBC's “Halftime Report” to explain why he's getting out of Energy.

Midstream and Energy have both been on a strong run in recent years. We compare the sectors in light of current macro factors. We then take a look at representative ETFs (XLE and AMLP) and share which is worth buying today.